bus Soaring energy costs boost inflation worries
Fed chairman watches for signs that interest rates should rise
By Martin Crutsinger
WASHINGTON -- Consumer prices shot up in January at the fastest pace in four months as the cost of gasoline and electricity posted big gains.
The Labor Department reported that its closely watched Consumer Price Index rose by 0.7 percent last month, with about 70 percent of that increase coming from higher energy costs. The core rate of inflation, which excludes energy and food, was better behaved, rising by 0.2 percent, a moderate increase that was in line with forecasts.
The Federal Reserve under new Chairman Ben Bernanke is closely watching to see whether the huge gains in energy prices over the past two years are starting to spill over into more widespread price troubles that would prompt the central bank to raise interest rates more aggressively to fight inflation.
The 0.7 percent overall rise in consumer prices was larger than the 0.5 percent increase that Wall Street had been expecting. It was the biggest price rise since a 1.2 percent surge in September.
Consumer prices have been on a rollercoaster in recent months depending on what energy does. Prices actually fell by 0.1 percent in December and 0.7 percent in November, reflecting declines in energy that had followed a huge increase in September in the wake of hurricane-related Gulf Coast production shutdowns that had sent the price of gasoline surging to over $3 per gallon.
For January, energy prices were up 5 percent, the biggest surge since an 11.8 percent rise in September. The January gain reflected a 6.4 percent rise in gasoline pump prices. Electricity prices soared by 5.5 percent, which was the largest one-month rise in 54 years of record keeping. That huge gain reflected efforts by utilities to pass on to consumers their higher fuel costs.
Food prices were up 0.5 percent, the biggest rise in nine months. More than half of the food price increase reflected big gains in fresh fruits and vegetables.
Excluding food and energy, core inflation rose a moderate 0.2 percent after a 0.1 percent increase in December. Clothing prices were up 0.3 percent in January, the biggest increase since August.
New car prices were up 0.6 percent, the biggest rise in a year, while airline fares shot up 1.2 percent, the biggest increase since a 1.5 percent rise last October.
Medical care, which usually leads the price increases, posted a modest 0.1 percent rise in January as the cost of physician services fell by 0.8 percent, the biggest decline on record.